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Auto stocks rise on December sales data; Eicher, Tata Motors lead

In early trade, Eicher Motors Ltd gained 4%, Tata Motors added 2.2%, Ashok Leyland rose 1.6% and Hero MotoCorp advanced 1.2%

January 03, 2022 / 01:11 PM IST
 
 
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Shares of Auto companies traded higher on January 3 on the back of better than expected sales numbers recorded in December. At 9:53am, the BSE Auto index climbed 1.11 percent, while the benchmark Sensex was up 0.83 percent or 474.38 points at 58,728.20.

In early trade, Eicher Motors Ltd gained 4%, Tata Motors added 2.2%, Ashok Leyland rose 1.6%, Hero MotoCorp advanced 1.2%, while Bajaj Auto, TVS Motors, Maruti Suzuki India were up 1% each.

“While easing semiconductor supplies support PV wholesalers, the 2W segment is yet to recover amid a high cost of ownership. We prefer 4Ws over 2Ws on the back of strong demand and offer a stable competitive environment. We expect the momentum in the CV cycle to continue. We prefer companies with: a higher visibility in terms of a demand recovery,  a strong competitive positioning,  margin drivers, and d) balance sheet strength”, Motilal Oswal said in a note to investors.

Royal Enfield sold 74,000 units in December, up 43% from the previous month despite new product launches being impacted by semi-conductor shortage. Motorcycle sales in the 350cc segment surged 44 percent month-on-month to 62.5 thousand units. Exports jumped 25 percent.

Tata Motors pipped Hyundai Motors India to become the second largest seller of passenger vehicles in the Domestic market for the first time in close to a decade in December 2021. Tata witnessed 44 percent year-on-year growth with electric vehicles.

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Analysts expect the new launch of Tigor EV (approved for FAME-II subsidy) is likely to improve EV sales while the recently launched SUV Punch (>8k unit sales in Oct’21) could further aid ICE (internal combustion engine) market share.

Maruti Suzuki' dispatches rose 10% month-on-month as production ramped up despite constrained production on chip shortages. Hero MotoCorp reported 13% rise in December sales ,while TVS Motors withessed 8% drop. Company's domestic sales declined 17%, while exports grew 8%.

“PV OEMs’ attempt to catch up to the demand for popular models was impacted by production cuts, while 2W OEMs have likely been able to pare down high channel inventories post festive season (~8-10 weeks). Entry-level demand trends across 2Ws and PVs have remained weak. OEMs are hoping to stoke consumer sentiment with new launches (e.g. M&M XUV700, Tata Punch, MG Astor, TVS Raider) even as availability of popular models remain elusive”, said ICICI Securities in a note to its investors

“However, increasing price hikes (~8-10% across segments since Jan’21) and rising fuel costs could limit consumer wallet spends at the entry level even as covid cases surge throughout the country. Faster vaccination leading to opening up of workplaces and educational institutes could aid revival of transportation segments (e.g. 3Ws/buses/scooters) in CY22”, the report added.



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Moneycontrol Research
first published: Jan 3, 2022 10:04 am
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